Rhetoric, Reality, and Reputation: Do CSR and Political Lobbying Protect Shareholder Wealth against Environmental Lawsuits?

Chelsea Liu, Chee Seng Cheong and Ralf Zurbruegg

Journal of Financial and Quantitative Analysis, 2020, vol. 55, issue 2, 679-706

Abstract: We investigate whether firms’ corporate social responsibility (CSR) reputations and environmental lobbying efforts protect shareholder wealth in the event of environmental lawsuits. Using a sample of lawsuits filed in United States Federal Courts, we find that firms with superior CSR reputations suffer worse market reactions to environmental allegations. In contrast, lobbying cushions filing-date valuation losses, providing insurance-like protection against lawsuits. Our results are robust to subsample analyses, a falsification test, propensity score matching, and alternative empirical proxies and model specifications.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:55:y:2020:i:2:p:679-706_10

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